Kinaxis Inc. Reports First Quarter 2019 Results

Reports 24% growth in total revenue and Adjusted EBITDA⁽¹⁾ of 35% of revenue

OTTAWA, May 10, 2019 /CNW/ - Kinaxis® (TSX: KXS) , the leader in empowering people to make confident supply chain decisions, today reported results for its fiscal first quarter ended March 31, 2019. All amounts are in U.S. dollars. All figures are prepared in accordance with International Financial Reporting Standards (IFRS), including the adoption of IFRS 15 and 16, unless otherwise indicated.

Q1 2019 total revenue increased 24% to $45.8 million; SaaS revenue grew by 17% to $27.3 million; subscription term license revenue grew 87% to $8.4 million; Adjusted EBITDA⁽¹⁾ was up 29% to $16.0 million (35% of revenue); and profit increased 53% to $7.0 million from $4.6 million.

"We are pleased with these strong first quarter results and with the overall health of our global pipeline. This performance is largely due to our significantly expanded sales team and focused global marketing activities.  During the quarter, we expanded business within our on-premise customer base and closed new SaaS opportunities, however some large and active deals are taking longer to finalize than expected.  We fully expect strong SaaS bookings in coming quarters.  Overall, we are reaffirming our full year revenue guidance, with slightly higher contribution from subscription term license revenue and related support and slightly lower SaaS revenue.  Given the strength of Q1 and our business outlook, we are increasing our guidance for full year Adjusted EBITDA.  As we have consistently demonstrated through marquee new partnerships and customer announcements, such as Lenovo this past quarter, our competitive position remains extremely strong. I remain firmly confident in our market position, our sales strategy, and our unique concurrent planning platform as we continue to execute against our growth plans," said John Sicard, Kinaxis CEO.

Q1 2019 Highlights
$ USD millions, except as otherwise indicated	Q1 2019	Q1 2018	Change
Total Revenue	45.8	36.8	24%
SaaS	27.3	23.3	17%
Subscription term license	8.4	4.5	87%
Gross profit	33.6	26.7	26%
	(73%)	(72%)
Profit	7.0	4.6	53%
	($0.26/diluted share)	($0.17/diluted share)
Adjusted EBITDA^(1)	16.0	12.3	29%
	(35%)	(33%)
Cash from operating activities	18.8	10.4	81%

(1)

"Adjusted EBITDA" is a non-IFRS measure and is not a recognized, defined or a standardized measure under IFRS. This measure as well as other non-IFRS financial measures reported by Kinaxis are defined in the "Non-IFRS Measures" section of this news release.

Analysis of Q1 2019 vs Q1 2018 Financial Highlights
Revenue: SaaS revenue growth of 17% resulted from contracts secured with new customers, as well as expansion of existing customer subscriptions. Subscription term license revenue growth of 87% relates to the timing of renewals, expansions and new engagements for on-premise and hybrid subscription arrangements, and will vary substantially quarter to quarter. Together, SaaS and subscription term license revenue growth were the main drivers behind the 24% increase in total revenue.

Gross profit margin: Growth in gross profit margin to 73% resulted from the growth in SaaS and subscription term license revenue, partly offset by an increase in costs of revenue. Such costs included headcount increases, an increase in partner and third-party costs, and higher depreciation costs associated with the expansion of data center capacity.

Profit and adjusted EBITDA: The 53% increase in profit and 29% growth in Adjusted EBITDA was due to an increase in revenue and gross profit, partly offset by an increase in operating expenses. Additional investments in research and development and sales and marketing, including new headcount and higher marketing event activity, drove operating expense growth.

Cash from operating activities: The 81% increase in cash from operating activities was due to collection of trade and other receivables and higher profit. At March 31, 2019, cash, cash equivalents and short-term investments grew by $18.3 million to $199.9 million from $181.5 million at December 31, 2018.

Financial Guidance
Kinaxis has updated its 2019 fiscal year financial targets, as follows:

				Previous FY 2019 Guidance	Updated FY 2019 Guidance
Total revenue				$183-188 million	$183-188 million
			SaaS	22-24% growth	20-22% growth
			Subscription term license	$20-22 million	$22-24 million
Adjusted EBITDA margin				23-25% of revenue	25-27% of revenue

This guidance is provided to enhance visibility into Kinaxis' expectations for financial targets for the periods indicated. Please refer to the section regarding forward-looking statements which forms an integral part of this release.

The nature of the company's long-term contracts provides visibility into future, contracted revenue. The following table presents revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at March 31, 2019.

	Remainder of 2019	2020	2021 and thereafter	Total
SaaS	77.3	67.1	68.3	212.6
Subscription term license	2.1	-	-	2.1
Maintenance and support	8.8	6.0	5.0	19.8
Total	88.2	73.1	73.2	234.5

This press release, along with the financial statements and MD&A for the three months ended March 31, 2019, are available on Kinaxis' website and on SEDAR at www.sedar.com.

Conference Call
Kinaxis will host a conference call today, May 10, 2019, to discuss these results. John Sicard, Chief Executive Officer, and Richard Monkman, Chief Financial Officer, will host the call starting at 8:30 a.m. Eastern time. A question and answer session will follow management's presentation.

Date:	Friday, May 10, 2019
Time:	8:30 a.m. Eastern Time
Webcast:	https://bit.ly/2KURAdS
Dial-in number:	[phone] or [phone]
Replay:	[phone] or [phone]
	Available until 12:00 a.m., Eastern Daylight Time Friday, May 17, 2019
Reference number:	6196908

Please call the conference telephone number five to ten minutes prior to the start time. An operator will register your name and organization.

About Kinaxis Inc.
Eliminating volatility in your supply chain is impossible, but managing it is not. Trusted by top brands, Kinaxis® gives people the confidence to know they are making the best planning decisions to maximize business performance. We solve complex business problems in easy-to-understand ways faster by combining human and machine intelligence to plan for any future, monitor risks and opportunities and respond at the pace of change. With the support of our community of supply chain experts and using our unique concurrent planning technique and single integrated planning platform, customers can realize higher revenue, lower costs and fewer risks.  For more Kinaxis news, visit Kinaxis.com or follow us on LinkedIn, Twitter or Facebook.

Non-IFRS Measures
This news release contains non-IFRS measures, specifically, Adjusted profit, Adjusted diluted earnings per share and Adjusted EBITDA.  We use Adjusted profit and Adjusted diluted earnings per share, which remove the impact of our redeemable preferred shares and share based compensation plans, to measure our performance as these measurements better align the reporting of our results and improve comparability against our peers. We use Adjusted EBITDA to provide investors with a supplemental measure of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures.  We believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers.  Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our capital expenditure and work capital requirements. Adjusted profit, Adjusted diluted earnings per share and Adjusted EBITDA are not recognized, defined or standardized measures under IFRS. Our definition of Adjusted profit, Adjusted diluted earnings per share and Adjusted EBITDA will likely differ from that used by other companies (including our peers) and therefore comparability may be limited.  Non-IFRS measures should not be considered a substitute for or in isolation from measures prepared in accordance with IFRS. Investors are encouraged to review our financial statements and disclosures in their entirety and are cautioned not to put undue reliance on non-IFRS measures and view them in conjunction with the most comparable IFRS financial measures. Kinaxis has reconciled Adjusted profit and Adjusted EBITDA to the most comparable IFRS financial measure as follows:

	Three months ended March 31,
	2019			2018
	(In thousands of USD)
Profit	$	6,966		$	4,553
Share-based compensation		3,072			3,158
Adjusted profit	$	10,038		$	7,711
Income tax expense		3,818			3,130
Depreciation		2,677			1,820
Foreign exchange loss (gain)		170			(196)
Net finance income		(765)			(145)
		5,900			4,609
Adjusted EBITDA	$	15,938		$	12,320
Adjusted EBITDA as a percentage of revenue		35%			33%

Forward-Looking Statements

Certain statements in this release constitute forward-looking statements within the meaning of applicable securities laws.  Forward-looking statements include statements as to our expectations for growth of annual total revenue, annual SaaS and Subscription term licenses revenue, and our expectations for Adjusted EBITDA margin achievement, in each case looking forward for our fiscal year ending December 31, 2019, as well as statements as to Kinaxis' growth opportunities and the potential benefits of, and markets and demand for, Kinaxis' products and services. These statements are subject to certain assumptions, risks and uncertainties, including our view of the relative position of Kinaxis' products and services compared to competitive offerings in the industry.

In particular, our guidance for 2019 annual total revenue, annual SaaS and Subscription term license revenue and annual Adjusted EBITDA margin, is subject to certain assumptions, including:

• our ability to win business from new customers and expand business from existing customers;
• the timing of new customer wins and expansion decisions by our existing customers;
• maintaining our current customer retention levels; and
• with respect to Adjusted EBITDA, our ability to contain expense levels while expanding our business.   

These and other assumptions, risks and uncertainties may cause Kinaxis' actual results, performance, achievements and developments to differ materially from the results, performance, achievements or developments expressed or implied by forward-looking statements. Material risks and uncertainties relating to our business are described under the headings "Forward-Looking Statements" and "Risks and Uncertainties" in our annual MD&A dated February 28, 2019, under the heading "Risk Factors" in our Annual Information Form dated March 29, 2018, and in our other public documents filed with Canadian securities regulatory authorities, which are available at www.sedar.com. Forward-looking statements are provided to help readers understand management's expectations as at the date of this release and may not be suitable for other purposes. Readers are cautioned not to place undue reliance on forward-looking statements. Kinaxis assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by law.

Kinaxis Inc.
Condensed Consolidated Interim Statements of Financial Position
As at March 31, 2019 and December 31, 2018
(Expressed in thousands of USD)
(Unaudited)
	March 31, 2019	December 31, 2018
Assets
Current assets:
Cash and cash equivalents	156,984	126,144
Short-term investments	42,907	55,404
Trade and other receivables	43,848	64,330
Prepaid expenses	6,926	5,815
	250,665	251,693
Non-current assets:
Property and equipment	21,598	22,785
Right-of-use assets	11,541	8,873
Contract acquisition costs	13,337	13,902
Unbilled receivables	2,977	457
Deferred tax assets	27	49
	300,145	297,759
Liabilities and Shareholders' Equity
Current liabilities:
Trade payables and accrued liabilities	14,148	21,623
Deferred revenue	75,001	78,496
Lease obligations	2,720	2,572
	91,869	102,691
Non-current liabilities:
Lease obligations	8,987	6,311
Deferred tax liabilities	3,680	4,075
	12,667	10,386
Shareholders' equity:
Share capital	126,339	124,951
Contributed surplus	26,913	24,284
Accumulated other comprehensive loss	(375)	(319)
Retained earnings	42,732	35,766
	195,609	184,682
	300,145	297,759

Kinaxis Inc.
Condensed Consolidated Interim Statements of Comprehensive Income
For the three months ended March 31, 2019 and 2018
(Expressed in thousands of USD, except share and per share data)
(Unaudited)
	2019	2018
Revenue	45,754	36,849
Cost of revenue	12,191	10,135
Gross profit	33,563	26,714
Operating expenses:
Selling and marketing	9,315	7,386
Research and development	7,994	6,749
General and administrative	6,065	5,237
	23,374	19,372
	10,189	7,342
Other income (expense):
Foreign exchange gain (loss)	(170)	196
Net finance income	765	145
	595	341
Profit before income taxes	10,784	7,683
Income tax expense	3,818	3,130
Profit	6,966	4,553
Other comprehensive income (loss):
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation differences - foreign operations	(56)	400
Total comprehensive income	6,910	4,953
Basic earnings per share	0.27	0.18
Weighted average number of basic Common Shares	26,091,542	25,542,978
Diluted earnings per share	0.26	0.17
Weighted average number of diluted Common Shares	26,805,963	26,667,141

Kinaxis Inc.
Condensed Consolidated Interim Statements of Changes in Shareholders' Equity
For the three months ended March 31, 2019 and 2018
(Expressed in thousands of USD)
(Unaudited)
	Share capital	Contributed surplus	Accumulated other comprehensive income (loss)	Retained earnings (deficit)	Total equity
Balance, December 31, 2017	108,253	19,294	(284)	(2,475)	124,788
Adjustment on initial application of IFRS 15	-	-	-	23,833	23,833
Adjusted balance, January 1, 2018	108,253	19,294	(284)	21,358	148,621
Profit	-	-	-	4,553	4,553
Other comprehensive income	-	-	400	-	400
Total comprehensive income	-	-	400	4,553	4,953
Share options exercised	3,798	(1,020)	-	-	2,778
Share based payments	-	3,158	-	-	3,158
Total shareholder transactions	3,798	2,138	-	-	5,936
Balance, March 31, 2018	112,051	21,432	116	25,911	159,510
Balance, December 31, 2018	124,951	24,284	(319)	35,766	184,682
Profit	-	-	-	6,966	6,966
Other comprehensive loss	-	-	(56)	-	(56)
Total comprehensive income (loss)	-	-	(56)	6,966	6,910
Share options exercised	1,388	(443)	-	-	945
Share based payments	-	3,072	-	-	3,072
Total shareholder transactions	1,388	2,629	-	-	4,017
Balance, March 31, 2019	126,339	26,913	(375)	42,732	195,609

Kinaxis Inc.
Condensed Consolidated Interim Statements of Cash Flows
For the three months ended March 31, 2019 and 2018
(Expressed in thousands of USD)
(Unaudited)
	2019	2018
Cash flows from operating activities:
Profit	6,966	4,553
Items not affecting cash:
Depreciation of property and equipment and right-of-use assets	2,677	1,820
Share-based payments	3,072	3,158
Investment tax credits recoverable	-	911
Net finance income	(765)	(145)
Income tax expense	3,818	3,130
Change in operating assets and liabilities	13,019	(1,759)
Interest received	873	361
Interest paid	(112)	(148)
Income taxes paid	(10,789)	(1,501)
	18,759	10,380
Cash flows from investing activities:
Purchase of property and equipment	(893)	(4,821)
Purchase of short-term investments	(15,005)	(15,043)
Redemption of short-term investments	27,506	40,005
	11,608	20,141
Cash flows from financing activities:
Payment of lease obligations	(600)	(454)
Common shares issued on exercise of stock options	945	2,778
	345	2,324
Increase in cash and cash equivalents	30,712	32,845
Cash and cash equivalents, beginning of period	126,144	103,392
Effects of exchange rates on cash and cash equivalents	128	350
Cash and cash equivalents, end of period	156,984	136,587

SOURCE Kinaxis Inc.

Investor Relations, Rick Wadsworth, Kinaxis, Tel: [phone], [email protected]; Media Relations, Danielle McNeil Taylor, Kinaxis, Tel: [phone], [email protected]

Related Links

www.kinaxis.com